SECURITIES
AND EXCHANGE COMMISSION
 Washington, D.C.
20549
  FORM
10-Q
  (Mark
One)
  x QUARTERLY REPORT
UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  For the
quarterly period ended March 31, 2009
  OR
  o TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
  Forthe transition period from ___________________
  Commission
file number 000-30785







CAMELOT ENTERTAINMENT GROUP,
INC.
 
 (Exact
name of registrant as specified in its charter)
  Delaware
                52-2195605(State
      or other jurisdiction ofincorporation
      or organization)
                (I.R.S.
      Employer
                  Identification
      No.)
  8001
Irvine Center Drive, Suite 400
 Irvine,
CA 92618
 (Address
of principal executive offices (zip code))
  (949)
754 - 3030
 (Registrant's
telephone number, including area code)
  Indicate
by check mark whether the registrant (1) filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the last 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
  Yes x Noo
  Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definition of "large accelerated filer," "accelerated
filer" and "smaller reporting company" in Rule 12b-2 of the Exchange
Act.
  Large
      Accelerated Filer
                o
                Accelerated
      Filer
                oNon-Accelerated
      Filer
                o
                Smaller
      Reporting Company
                x
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
  YesoNo x
  As of
March 31, 2009 the Registrant had outstanding 7,215,666,424 shares of Common
Stock, $0.001 par value. The registrant had outstanding 27,295,521 shares of
Preferred Stock series A, B, and C par value $0.001.
 
  1
  
 CAMELOT
ENTERTAINMENT GROUP, INC.
 INDEX
TO FORM 10-Q
 
 PART
      I. FINANCIAL INFORMATIONItem
      1. Financial Statements (Unaudited)
                4Balance
      Sheets as of March 31, 2009 and December 31, 2008
                4Statements
      of Operation for the three ended March 31,2009 and
    2008
                5Statements
      of Cash Flows for the three months ended March 31, 2009 and
      2008
                6Notes
      to Financial Statements
                7 -
      13Item
      2. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations
                14
      - 22Item
      3. Quantitative and Qualitative Disclosures About Market
    Risk
                22Item
      4. Controls and Procedures
                23PART
      II. OTHER INFORMATIONItem
      1. Legal Proceedings
                25Item
      2. Changes in Securities and Use of Proceeds
                25Item
      3. Defaults Upon Senior Securities
                25Item
      4. Submissions of Matters to a Vote of Security Holders
                25Item
      5. Other Information
                25Item
      6. Exhibits and Reports on Form 8-K
                26Signatures:
                26
 
 
  
 
 
 
 
  2
  
  THIS
REPORT ON FORM 10-Q CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND WITHIN THE MEANING OF
SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, WHICH ARE
SUBJECT TO THE "SAFE HARBOR" CREATED BY THOSE SECTIONS. THESE FORWARD-LOOKING
STATEMENTS INCLUDE BUT ARE NOT LIMITED TO STATEMENTS CONCERNING OUR BUSINESS
OUTLOOK OR FUTURE ECONOMIC PERFORMANCE; ANTICIPATED PROFITABILITY, REVENUES,
EXPENSES OR OTHER FINANCIAL ITEMS; AND STATEMENTS CONCERNING ASSUMPTIONS MADE OR
EXCEPTIONS AS TO ANY FUTURE EVENTS, CONDITIONS, PERFORMANCE OR OTHER MATTERS
WHICH ARE "FORWARD-LOOKING STATEMENTS" AS THAT TERM IS DEFINED UNDER THE FEDERAL
SECURITIES LAWS. ALL STATEMENTS, OTHER THAN HISTORICAL FINANCIAL INFORMATION,
MAY BE MARKET TO BE FORWARD-LOOKING STATEMENTS. THE WORDS "BELIEVES", "PLANS",
"ANTICIPATES", "EXPECTS", AND SIMILAR EXPRESSIONS HEREIN ARE INTENDED TO
IDENTIFY FORWARD-LOOKING STATEMENTS. FORWARD-LOOKING STATEMENTS ARE SUBJECT TO
RISKS, UNCERTAINTIES, AND OTHER FACTORS, WHICH WOULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THOSE STATED IN SUCH STATEMENTS. FORWARD-LOOKING
STATEMENTS INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "FACTORS THAT MAY
AFFECT FUTURE RESULTS," AND ELSEWHERE IN THIS REPORT, AND THE RISKS DISCUSSED IN
THE COMPANY'S OTHER SEC FILINGS.
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   3
  
 Camelot
      Entertainment Group, Inc.(A
      Development Stage Company)Balance
      SheetsASSETSMarch
      31,
                                                
                                                
                                                December
      31,2009
                                                
                                                
                                                2008UnauditedCurrent AssetsCash
                                                
                                                $
                                                40,156
                                                
                                                
                                                $
                                                175Prepaid
      expenses
                                                
                                                
                                                -
                                                
                                                
                                                
                                                1,733Total
      Current Assets
                                                
                                                
                                                40,156
                                                
                                                
                                                
                                                1,908Other
      assets
                                                
                                                
                                                2,500
                                                
                                                
                                                
                                                -Total
      Assets
                                                
                                                $
                                                42,656
                                                
                                                
                                                $
                                                1,908LIABILITIES AND STOCKHOLDERS'
      DEFICITCurrent LiabilitiesAccounts
      payable and accrued liabilities
                                                
                                                $
                                                216,640
                                                
                                                
                                                $
                                                206,847Accrued
      expenses to related parties
                                                
                                                
                                                864,500
                                                
                                                
                                                
                                                722,000Secured
      convertible notes payable, net of discount of $303,790 and $394,506,
      respectively
                                                
                                                
                                                158,870
                                                
                                                
                                                
                                                92,070Derivative
      liability - conversion feature
                                                
                                                
                                                181,663
                                                
                                                
                                                
                                                147,838Note
      payable to stockholder
                                                
                                                
                                                -
                                                
                                                
                                                
                                                215,598Stockholder
      advances
                                                
                                                
                                                81,546
                                                
                                                
                                                
                                                22,830Convertible
      notes payable
                                                
                                                
                                                -
                                                
                                                
                                                
                                                15,000Total
      Current Liabilities
                                                
                                                
                                                1,503,219
                                                
                                                
                                                
                                                1,422,183Long
      Term LiabilitiesDerivative
      liability - preferred stock Series A, B, and C
                                                
                                                
                                                34,751
                                                
                                                
                                                
                                                65,630Secured
      convertible note payable, net of discount  $349,873 and
      $407,246, respectively
                                                
                                                
                                                369,583
                                                
                                                
                                                
                                                311,897Derivative
      liability - conversion feature
                                                
                                                
                                                282,371
                                                
                                                
                                                
                                                218,500Derivative
      liability - warrant
                                                
                                                
                                                2,009
                                                
                                                
                                                
                                                3,992Total
      Long Term Liabilities
                                                
                                                
                                                688,714
                                                
                                                
                                                
                                                600,019Total
      Liabilities
                                                
                                                
                                                2,191,933
                                                
                                                
                                                
                                                2,022,202Series
      A, B, C Convertible Preferred Stock
                                                
                                                
                                                56,505
                                                
                                                
                                                
                                                50,905par
      value $.001 per share, 50,000,000 shares authorized: 10,147,511, 9,996,510
      and 7,151,500shares
      issued and outstanding as of March 31, 2009par
      value $.001 per share, 50,000,000 shares authorized: 7,347,510, 7,196,510
      and 7,151,500shares
      issued and outstanding as of December 31, 2008Stockholders' DeficitCommon
      Stock; Par Value $.001 Per Share; Authorized2,950,000,000
      Shares; 1,563,977,942 SharesIssued
      and 1,563,669,608 Outstanding as of December 31, 2008
                                                
                                                
                                                7,215,666
                                                
                                                
                                                
                                                1,563,670Authorized
      9,950,000,000 shares; 7,215,974,758 issued and7,215,666,424
      shares outstanding as of March 31, 2009Additional
      paid-in capital
                                                
                                                
                                                8,202,528
                                                
                                                
                                                
                                                13,070,152Deficit
      accumulated during the development stage
                                                
                                                
                                                (17,623,976
                                                )
                                                
                                                
                                                (16,705,021
                                                )Total
      Stockholders' Deficit
                                                
                                                
                                                (2,205,782
                                                )
                                                
                                                
                                                (2,071,199
                                                )Total
      Liabilities and Stockholders' Deficit
                                                
                                                $
                                                42,656
                                                
                                                
                                                $
                                                1,908The
      accompanying notes are an integral part of theses financial
      statements.
 
 4
 
 Camelot
      Entertainment Group, Inc.(A
      Development Stage Company)Statements
      of Operations(Unaudited)FromInception
      onFor
      the Three
                                                  
                                                  
                                                  For
      the Three
                                                  
                                                  
                                                  April
      21, 1999Months
      Ended
                                                  
                                                  
                                                  Months
      Ended
                                                  
                                                  
                                                  throughMarch
      31, 2009
                                                  
                                                  
                                                  March
      31, 2008
                                                  
                                                  
                                                  March
      31, 2009REVENUE
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  58,568Total
      Revenue
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  58,568EXPENSESCosts
      of services
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  95,700Sales
      and marketing
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  53,959Research
      and development
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  252,550General
      and administrative
                                                  
                                                  
                                                  206,132
                                                  
                                                  
                                                  
                                                  236,220
                                                  
                                                  
                                                  
                                                  13,624,700Impairment
      of assets
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  2,402,338Impairment
      of investments in other companies
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  710,868Total
      Expenses
                                                  
                                                  
                                                  206,132
                                                  
                                                  
                                                  
                                                  236,220
                                                  
                                                  
                                                  
                                                  17,140,115NET
      OPERATING LOSS
                                                  
                                                  
                                                  (206,132
                                                  )
                                                  
                                                  
                                                  (236,220
                                                  )
                                                  
                                                  
                                                  (17,081,547
                                                  )OTHER
      INCOME (EXPENSES)Interest
      expense
                                                  
                                                  
                                                  (639,030
                                                  )
                                                  
                                                  
                                                  (81,230
                                                  )
                                                  
                                                  
                                                  (2,814,497
                                                  )Gain
      (loss) on derivative liabilities
                                                  
                                                  
                                                  (73,793
                                                  )
                                                  
                                                  
                                                  420,998
                                                  
                                                  
                                                  
                                                  1,816,567Gain
      on sale of interest in CDG
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  200,000
                                                  
                                                  
                                                  
                                                  200,000Gain
      on extinguishment of debt
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  255,500Total
      Other Income (Expenses)
                                                  
                                                  
                                                  (712,823
                                                  )
                                                  
                                                  
                                                  539,768
                                                  
                                                  
                                                  
                                                  (542,430
                                                  )NET
      INCOME (LOSS)
                                                  
                                                  $
                                                  (918,955
                                                  )
                                                  
                                                  $
                                                  303,548
                                                  
                                                  
                                                  $
                                                  (17,623,976
                                                  )Basic
      income (loss) per common share
                                                  
                                                  $
                                                  (0.00
                                                  )
                                                  
                                                  $
                                                  0.13Dilutive
      income (loss) per common share
                                                  
                                                  $
                                                  (0.00
                                                  )
                                                  
                                                  $
                                                  0.00Weighted
      average number of shares outstanding:Basic
                                                  
                                                  
                                                  3,455,409,278
                                                  
                                                  
                                                  
                                                  2,268,452Dilutive
                                                  
                                                  
                                                  9,950,000,000
                                                  
                                                  
                                                  
                                                  500,000,000The
      accompanying notes are an integral part of theses financial
      statements.







5




Camelot
      Entertainment Group, Inc(A
      Development Stage Company)Statements
      of Cash Flows(Unaudited)FromInception
      onApril
      21, 1999For
      the Three
                                                        
                                                        
                                                        For
      the Three
                                                        
                                                        
                                                        throughMonths
      Ended
                                                        
                                                        
                                                        Months
      Ended
                                                        
                                                        
                                                        March
      31,March
      31, 2009
                                                        
                                                        
                                                        March
      31, 2008
                                                        
                                                        
                                                        2009OPERATING
      ACTIVITIESNet
      (loss) income:
                                                        
                                                        $
                                                        (918,955
                                                        )
                                                        
                                                        $
                                                        303,548
                                                        
                                                        
                                                        $
                                                        (17,623,976
                                                        )Adjustments
      to reconcile net income (loss) to cash provided (used) by operating
      activities:Amortization
      of deferred financing costs and discounts on notes payable
                                                        
                                                        
                                                        129,507
                                                        
                                                        
                                                        
                                                        75,868
                                                        
                                                        
                                                        
                                                        770,718Imputed
      interest on related party advances
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        4,500
                                                        
                                                        
                                                        
                                                        38,484(Gain)
      loss on change of derivative liabilities
                                                        
                                                        
                                                        73,793
                                                        
                                                        
                                                        
                                                        (420,998
                                                        )
                                                        
                                                        
                                                        (1,171,458
                                                        )Common
      stock issued for interest expenses
                                                        
                                                        
                                                        498,432
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        1,202,341Common
      stock issued per dilution agreement
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        368,508Value
      of options expensed
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        351,000Gain
      on extinguishment of debt
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        (255,500
                                                        )Depreciation
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        3,997Amortization
      of deferred compensation
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        1,538,927Common
      stock issued for services
                                                        
                                                        
                                                        12,809
                                                        
                                                        
                                                        
                                                        30,000
                                                        
                                                        
                                                        
                                                        3,567,376Common
      stock issued for related party services
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        22,000Common
      stock issued for technology
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        19,167Impairment
      of investments in other companies
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        710,868Impairment
      of assets
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        2,758,060Prepaid
      services expensed
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        530,000Expenses
      paid through notes payable proceeds
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        66,439Loss
      on disposal of property and equipment
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        5,854Preferred
      stock issued to shareholder
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        3,366,000Change
      in assets and liabilities:(increase)
      decrease in other current assets
                                                        
                                                        
                                                        1,733
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        (434
                                                        )Increase
      (decrease) in accounts payable and accrued liabilities
                                                        
                                                        
                                                        9,794
                                                        
                                                        
                                                        
                                                        (24,950
                                                        )
                                                        
                                                        
                                                        567,977Increase
      (decrease) in due to officers
                                                        
                                                        
                                                        142,500
                                                        
                                                        
                                                        
                                                        127,000
                                                        
                                                        
                                                        
                                                        1,125,800Cash
      provided by (used in) operating activities
                                                        
                                                        
                                                        (50,387
                                                        )
                                                        
                                                        
                                                        94,968
                                                        
                                                        
                                                        
                                                        (2,037,852
                                                        )Cash
      flows from investing activities:Purchase
      of fixed assets
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        (6,689
                                                        )Purchase
      of scripts and deposits
                                                        
                                                        
                                                        (2,500
                                                        )
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        (132,200
                                                        )Cash
      used in investing activities
                                                        
                                                        
                                                        (2,500
                                                        )
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        (138,889
                                                        )Cash
      flows from financing activities:Contributed
      capital
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        25,500Proceeds
      from related party note payable
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        1,316,613Payments
      on related party notes payable
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        (145,652
                                                        )Proceeds
      from notes payable
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        1,317,998Payments
      on notes payable
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        (254,477
                                                        )Advances
      from shareholder
                                                        
                                                        
                                                        139,768
                                                        
                                                        
                                                        
                                                        15,395
                                                        
                                                        
                                                        
                                                        415,630Payments
      on shareholder advances
                                                        
                                                        
                                                        (46,900
                                                        )
                                                        
                                                        
                                                        (91,814
                                                        )
                                                        
                                                        
                                                        (459,855
                                                        )Cash
      provided by (used in) financing activities
                                                        
                                                        
                                                        92,868
                                                        
                                                        
                                                        
                                                        (76,419
                                                        )
                                                        
                                                        
                                                        2,215,757Increase
      (decrease) in cash
                                                        
                                                        
                                                        39,981
                                                        
                                                        
                                                        
                                                        18,549
                                                        
                                                        
                                                        
                                                        39,016Cash
      at beginning of period
                                                        
                                                        
                                                        175
                                                        
                                                        
                                                        
                                                        122
                                                        
                                                        
                                                        
                                                        1,140Cash
      at the end of the period
                                                        
                                                        $
                                                        40,156
                                                        
                                                        
                                                        $
                                                        18,671
                                                        
                                                        
                                                        $
                                                        40,156Supplemental
      cash flow information:Cash
      paid for interest
                                                        
                                                        $
                                                        -
                                                        
                                                        
                                                        $
                                                        -Cash
      paid for income taxes
                                                        
                                                        $
                                                        -
                                                        
                                                        
                                                        $
                                                        -Non-cash
      investing and financing transactions:Stock
      issued for related party liabilities
                                                        
                                                        $
                                                        -
                                                        
                                                        
                                                        $
                                                        -
                                                        
                                                        
                                                        $
                                                        248,581Creation
      of additional debt discount
                                                        
                                                        $
                                                        -
                                                        
                                                        
                                                        $
                                                        -
                                                        
                                                        
                                                        $
                                                        920,315Stock
      issued for debt conversion
                                                        
                                                        $
                                                        254,514
                                                        
                                                        
                                                        $
                                                        9,400
                                                        
                                                        
                                                        $
                                                        350,272Derivative
      liability relieved by conversion
                                                        
                                                        $
                                                        10,025
                                                        
                                                        
                                                        $
                                                        4,924
                                                        
                                                        
                                                        $
                                                        78,146Accrued
      interest converted into convertible notes payable
                                                        
                                                        $
                                                        -
                                                        
                                                        
                                                        $
                                                        -
                                                        
                                                        
                                                        $
                                                        144,143Accrued
      salaries relieved with issuance of common stock
                                                        
                                                        $
                                                        -
                                                        
                                                        
                                                        $
                                                        -
                                                        
                                                        
                                                        $
                                                        261,300Stock
      issued per finance agreement
                                                        
                                                        $
                                                        -
                                                        
                                                        
                                                        $
                                                        -
                                                        
                                                        
                                                        $
                                                        500,000The
      accompanying notes are an integral part of theses financial
      statements.


6
 
 Camelot
Entertainment Group, Inc.
 (A
Development Stage Company)
 Notes
to Financial Statements
 (Unaudited)





1.
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES





Organization





Camelot
Entertainment Group, Inc. (the “Company” or “Camelot”), a Delaware corporation,
is a development stage film, television, digital media and entertainment
company. The Company classifies its businesses into the following three major
divisions:





●
            Camelot
      Film Group, consisting principally of feature film, television, home
      video, and digital media production and
  distribution;





●
            Camelot
      Studio Group, consisting principally of site acquisition, design,
      development and operation of Camelot Studio locations domestically and
      internationally;





●
            Camelot
      Production Services Group, consisting principally of consulting,
      education, finance, production support and technology
      services.





At March
31, 2009 the Company had a total of two (2) employees and approximately
four (4) consultants, which provide services to the Company on an as needed
basis. The Company also retains independent contractors on a project-by-project
basis. The Company has reorganized its operating structure to minimize expenses
during the current uncertain economic conditions while maintaining its ongoing
and planned activity levels, including planned acquisitions, by outsourcing
professional and industry services whenever and wherever possible.





Basis of
Presentation





Camelot
is considered to be a development stage enterprise as defined in Statement of
Financial Accounting Standards (“SFAS”) No. 7, “Accounting and Reporting by
Development Stage Enterprises.” Consequently, Camelot has presented these
financial statements in accordance with that Statement, including losses
incurred from April 21, 1999 (Inception) to March 31, 2009. The Company has not
presented the statement of stockholders’ deficit for the three months ended
March 31, 2009, as the significant transactions relate to the issuance of common
stock issued for services and conversions of debt which are described elsewhere
in the document.





The
accompanying unaudited financial statements as of March 31, 2009 and for the
three months ended March 31, 2009 and 2008, respectively, have been prepared in
accordance with accounting principles generally accepted in the United States
for interim financial information, pursuant to the rules of the regulations of
the Securities and Exchange Commission. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for audited financial statements. The notes to the financial
statements which would substantially duplicate the disclosures contained in the
audited financial statements for the most recent calendar year 2008 as
reported in the Company's Form 10-K have been omitted.  The results of
operations for the three months ended March 31, 2009 and 2008 are not
necessarily indicative of the results to be expected for the full year. In the
opinion of Camelot’s management, the interim information includes all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the results for the interim periods. The footnote
disclosures related to the interim financial information included herein are
also unaudited. Such financial information should be read in conjunction with
the financial statements and related notes thereto which are part of the
Company’s Annual Report on Form 10-K for the year ended December 31,
2008.





Earnings (Loss) per
Share





Basic
earnings (loss) per share are based on the weighted average number of shares of
common stock outstanding during the period.  Diluted earnings (loss)
per share also includes the effect of stock options, other common stock
equivalents outstanding during the during the period, and assumes the conversion
of the Company’s Series A, B  and C preferred stock and conversion of
convertible notes payable for the period of time such stock and notes were
outstanding, if such preferred stock and convertible notes are
dilutive.  For the three months ended March 31, 2009, dilutive
securities on a fully converted basis would cause the Company to be in excess of
their authorized shares of 9,950,000,000. Thus, the dilutive earnings per share
for the three months ended March 31, 2009 is limited to the amount of common
stock authorized by the Company’s stockholders.




The
following table sets forth the computation of the numerator and of basic and
diluted loss per share for the three months ended March 31, 2009 and 2008. There
were no adjustments to the denominator.




7
 
 Camelot
Entertainment Group, Inc.
 (A
Development Stage Company)
 Notes
to Financial Statements
 (Unaudited)





1. BASIS OF PRESENTATION AND
SIGNIFICANT ACCOUNTING POLICIES- continued





March 31,
      2009
                        
                        
                        March
      31, 2008Weighted
      average common shares outstandingUsed
      in calculating basic earnings (loss) per share
                        
                        
                        3,455,409,278
                        
                        
                        
                        226,845,221Effect
      of dilutive convertible preferred stock and notes
                        
                        
                        6,494,590,722
                        
                        
                        
                        221,845,221Weighted
      average common shares outstanding used inCalculating
      diluted earnings (loss) per share
                        
                        
                        9,950,000,000
                        
                        
                        
                        500,000,000




As of
March 31, 2009, the Company has only 9,950,000,000 shares authorized, thus the
effects of convertible preferred stock and notes into common stock are limited
to the amount authorized by the Company’s stockholders.





Recent Accounting
Pronouncements





In
December 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
141(R), “Business Combinations” (“SFAS 141(R)”), which replaces FAS 141. SFAS
141(R) establishes principles and requirements for how an acquirer in a business
combination recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, and any controlling interest;
recognizes and measures the goodwill acquired in the business combination or a
gain from a bargain purchase; and determines what information to disclose to
enable users of the financial statements to evaluate the nature and financial
effects of the business combination. FAS 141(R) is to be applied prospectively
to business combinations. The adoption of SFAS 141(R) did not have a significant
impact on our financial statements.





In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests
in Consolidated Financial Statements, an amendment of ARB No. 51” (“SFAS
160”), which addresses the accounting and reporting framework for minority
interests by a parent company. SFAS 160 also addresses disclosure requirements
to distinguish between interests of the parent and interests of the
noncontrolling owners of a subsidiary. SFAS 160 will become effective our first
quarter of 2009. The adoption of SFAS 141(R) did not have a significant impact
on our financial statements.





In
June 2008, FASB issued EITF Issue No. 07-5 (EITF 07-5), Determining whether an Instrument
(or Embedded Feature) is indexed to an Entity’s Own Stock. EITF
No. 07-5 is effective for financial statements issued for fiscal years
beginning after December 15, 2008, and interim periods within those fiscal
years. Early application is not permitted. Paragraph 11(a) of SFAS No. 133
— specifies that a contract that would otherwise meet the definition of a
derivative but is both (a) indexed to the Company’s own stock and
(b) classified in stockholders’ equity in the statement of financial
position would not be considered a derivative financial instrument. EITF 07-5
provides a new two-step model to be applied in determining whether a financial
instrument or an embedded feature is indexed to an issuer’s own stock and thus
able to qualify for the SFAS No. 133 paragraph 11(a) scope exception. The
adoption of EITF 07-5 did not have a significant impact on our financial
statements.





2.  GOING
CONCERN




The
accompanying financial statements have been prepared assuming that Camelot will
continue as a going concern. During the three months ended March 31, 2009,
Camelot had no revenue producing operations, at March 31, 2009 a negative
working capital of $1,463,063 and an accumulated deficit from Inception of
$17,623,976. These conditions raise substantial doubt about Camelot’s ability to
continue as a going concern. The financial statements do not include any
adjustments to reflect the possible future effects on the classification of
liabilities that may result from the outcome of this uncertainty.





Management’s
plans with respect to the current situation consist of restructuring its debt,
seeking additional financial resources from its existing investors, note
holders, debt holders, officers, directors (past and present) and it’s CEO
Robert Atwell.  In addition, the Company is planning a major capital
raising effort during the second or third quarter of 2009. However, especially
due to the current worldwide
economic conditions, there can be no assurances that our efforts will be
successful. If current conditions persist, the Company may have to delay its
planned major capital raising efforts.







8
 
 Camelot
Entertainment Group, Inc.
 (A
Development Stage Company)
 Notes
to Financial Statements
 (Unaudited)




3.  CONVERTIBLE
NOTES PAYABLE





Conversions and Valuation of
Derivative Liabilities Issued with 2006, 2007 and 2008 Convertible
Notes





As of
March 31, 2009, Camelot estimated the fair value of the derivatives liabilities
to be a total of $466,042 resulting in a loss on derivative liability presented
in the statement of operations for the three months ended March 31, 2009 of
$95,712.  In addition, Camelot amortized $129,507 of the discount on
the convertible note payable to interest expense. As of March 31, 2009, the
principal balances of the notes were approximately $1,182,000.




At March
31, 2009, the fair market value of the compound embedded derivative was
estimated using a lattice model incorporating weighted average probability cash
flow. The valuation was calculated using a lattice model with the following
assumptions: the stock price would increase in the short term at the cost of
equity with a 250% volatility, there was a 95% probability the Company would not
be in default of its registration requirements, assuming an event of default
occurring 5% of the time increasing .10% per month, reset events projected to
occur 5% of the time at an exercise price of $0.0001, the holder would
automatically convert at a stock price of $0.20 if the registration was
effective and the Company was not in default, the Company would trigger
redemption of the note when available at a stock price of $0.10 or higher,
alternative financing would be initially available to redeem the note and start
to increase monthly by 10% of the notes to a maximum of 75% and the trading
volume would increase at 1% per month. At March 31, 2009, the fair market value
of the warrants was estimated using Black Scholes with the major assumptions of
(1) calculated volatility of 200%; (2) expected term of six years; (3) risk free
rate of 3.45% and (4) expected dividends of zero.





During
the three months ended March 31, 2009, the holders of convertible notes
converted $23,916 resulting in the issuance of 398,600,300 shares of common
stock. Upon conversion, the Company reclassed approximately $10,025 of the
compound derivative to additional paid-in capital.





In the
event of full conversion of the aggregate principal amount of the notes of
approximately $1,182,000 as of March 31, 2009, we would have to issue a total of
19,696,716,667 shares of common stock, which exceeds our authorized shares of
9,950,000,000. However, due to contractual limitations, the most that could be
converted in any singular conversion is approximately 10,000,000 shares, or
4.99% of the outstanding. In addition, there are contractual limitations that
could be imposed by Camelot that would result in the inability of the note
holders to convert during any given 30-day period. There is no limit to the
number of shares that Camelot may be required to issue upon conversion of the
notes, as it is dependent upon Camelot’s share price, which varies from day to
day. This could cause significant downward pressure on the price of Camelot’s
common stock.





4.  RELATED
PARTY TRANSACTIONS





Accrued
Salaries





At March
31, 2009, the Company has accrued $864,500 in compensation to its current
officers.  The amount due to officers includes: Robert Atwell,
$616,000 and George Jackson, $248,500. Amounts accrued during the three months
ended March 31, 2008 were $355,000
and $122,000 to Robert Atwell and George Jackson, respectively.





Advances
from Affiliates





During
the three months ended March 31, 2009 and 2008, the Company received $139,768
and $15,395 in advances from an affiliate owned by the CEO,
respectively.  During the three months ended March 31, 2009 and 2008,
the Company paid $81,152 and $91,814 in advances back to the CEO,
respectively.




Robert
Atwell





In
October 2007, the $300,000 note payable due to the Scorpion Bay, LLC was
transferred to property owned by Robert Atwell in which secured the note
payable. The note is due on demand and incurs interest at 6%. As of March 31,
2009, the balance due to Robert Atwell was $0. See Note 6 for discussion of the
assignment of the notes under wrap around agreements







9
 
 Camelot
Entertainment Group, Inc.
 (A
Development Stage Company)
 Notes
to Financial Statements
 (Unaudited)




5.  PREFERRED
STOCK





Derivative
Valuation





At the
time of issuance of the Series A, B and C Preferred stock, the Company did not
have enough authorized shares on a fully diluted basis due to the conversion
feature of the convertible notes, which caused the Series A, B and C Preferred
stock to be tainted, and more akin to debt. In addition, management determined
that the Series A, B and C Preferred contained compound embedded derivative
liabilities under SFAS 133 and EITF 00-19, because of the classification of
these securities as liabilities. The Company determined that the compound
embedded conversion features required bifurcation from the remaining Series A, B
and C Preferred and required an estimate of its fair market value. The fair
market value of the compound embedded derivative was estimated using a lattice
model incorporating weighted average probability cash flow.





As of
March 31, 2009, there were 9,996,510 shares outstanding of our $0.001 par value
Series B Convertible Preferred Stock. The Series B Preferred converts to 10
shares of common stock for every one share of Series B Preferred Stock. Each
share of Series B Preferred Stock is entitled to 1,000 votes. Series B Preferred
ranks superior to all other classes of stock.





As of
March 31, 2009, there were 10,147,511 shares outstanding of our $0.001 par value
Series A Convertible Preferred Stock. The Series A Preferred converts to four
shares of common stock for every one share of Series A Preferred Stock. Each
share of Series A Preferred Stock is entitled to 50 votes. Series A Preferred
ranks superior to our common stock and ranks junior to our Series B Preferred
Stock.





As of
March 31, 2009, there were 7,151,500 shares outstanding of our $0.001 par value
Series C Convertible Preferred Stock. The Series C Preferred converts to one
share of common stock for every one share of Series C Preferred Stock. Each
share of Series C Preferred Stock is entitled to 1 vote. Series C Preferred
ranks superior to our common stock and ranks junior to our Series B Preferred
Stock and Series A Preferred Stock.





As of
March 31, 2009, the Company estimated the fair value of the preferred stock
derivative liabilities to be a total of $34,751 resulting in a gain on
derivative liability presented in the statement of operations of $29,196. At
March 31, 2009, the fair market value of the conversion feature derivative
related to the Series A, B and C Convertible Preferred stock was estimated using
a lattice model incorporating weighted average probability cash flow. The
valuation was calculated using a lattice model with the following assumptions:
the stock price would increase in the short term at the cost of equity with a
250% volatility and there was a 100% probability the Company would not be in
default of its registration requirements as there were none.





Determinationof Fair
Value





The fair
value of the Company’s preferred stock issuances are based upon the closing
market price of the Company’s common stock on the date of issuance assuming no
future performance commitments exist. All shares discussed below are valued
using these assumptions.





Issuances
During the Quarter





On March
23, 2009, the Company issued George Jackson 300,000 shares of its $0.001 par
value Class A Convertible Preferred stock at $0.0001 per Share for services and
other consideration rendered with a value of $30 to the Company.





On March
23, 2009, the Company issued George Jackson 300,000 shares of its $0.001 par
value Class B Convertible Preferred stock at $0.0001 per Share for services and
other consideration rendered with a value of $30 to the Company.





On March
23, 2009, the Company issued Robert Atwell 2,500,000 shares of its $0.001 par
value Class A Convertible Preferred stock at $0.0001 per Share for services and
other consideration rendered with a value of $250 to the Company.





On March
23, 2009, the Company issued Robert Atwell 2,500,000 shares of its $0.001 par
value Class B Convertible Preferred stock at $0.0001 per Share for services and
other consideration rendered with a value of $250 to the Company.




10
 
 Camelot
Entertainment Group, Inc.
 (A
Development Stage Company)
 Notes
to Financial Statements
 (Unaudited)


6.
 STOCKHOLDERS’ DEFICIT





Authorized
Shares





On March
26, 2009, the Company’s board of directors authorized an increase in the
authorized shares of stock to 6,000,000,000.





On March
29, 2009, the Company’s board of directors increased the authorized shares of
stock to 10,000,000,000, including 9,950,000,000 shares of common
stock.





Determination of Fair
Value





The fair
value of the Company’s common stock issuances are based upon the closing market
price of the Company’s common stock on the date of issuance assuming no future
performance commitments exist. All shares discussed below are valued using these
assumptions.





Common Stock Held in
Treasury





On March
2, 2009, the Company set aside 900,000,000 shares for future funding and other
corporate transactions in order to meet current and contemplated terms and
conditions of consulting and funding agreements to be held in reserve. As of
March 31, 2009, 6,679,246 are still held in reserve.





Common Stock Issued for
Wrap-Around Agreements





At
various times during the three months ended, March 31, 2009, the Company’s CEO
assigned portions of the amounts due to him to third parties (“Wrap-Around
Agreement”). Under the terms of the Wrap-Around Agreement the notes incurred
interest at 15% per annum and generally had a maturity date of one year from the
transaction. In addition, at the holders option, at any time after the issuance
of the note, to convert all or any lesser portion of the Outstanding Principal
Amount and accrued but unpaid Interest into common voting stock at the price of
50 % discount of the average three deep bid on the day of
conversion.  Generally, the notes were converted on the date of
purchase or shortly thereafter. In connection with these transactions the
Company recorded the excess value of the common stock issued over the note
relieved as interest expense. The fair value of the common stock was determined
based upon the closing market price of the Company’s common stock on the date of
conversion. The following is a summary of Wrap-Around Agreement
conversions:





On
January 6, 2009, the Company issued Watson Investment Enterprises 300,000,000
shares at $0.00005 per share in satisfaction of notes of $15,000 in accordance
with the terms and conditions of the Wrap-Around Agreement between Watson
Investment Enterprises and the Company.  In connection with this
conversion, the Company recorded the excess of fair value of $60,000 over the
note relieved of $45,000 as interest expense.





On
January 6, 2009, the Company issued Hope Capital 100,000,000 shares at $0.000055
per share in satisfaction of notes of $5,500 in accordance with the terms and
conditions of the Wrap-Around Agreement between Hope and the Company. In
connection with this conversion, the Company recorded the excess of fair value
of $20,000 over the note relieved of $14,500 as interest expense.


In
connection with this conversion, the Company recorded the excess of fair value
of $45,455 over the note relieved of $20,455 as interest expense.





On
January 15, 2009, the Company issued Watson Investment Enterprises 110,000,000
shares at $0.000045 per share in satisfaction of notes of $5,000 in accordance
with the terms and conditions of the Wrap-Around Agreement between Watson
Investment Enterprises and the Company.  In connection with this
conversion, the Company recorded the excess of fair value of $22,000 over the
note relieved of $17,000 as interest expense.





On
January 28, 2009, the Company issued TJ Management Group, LLC 454,545,454 shares
at $0.000055 per share in satisfaction of notes of $23,300 in accordance with
the terms and conditions of the Wrap-Around Agreement between TJ Management
Group, LLC and the Company.  In connection with this conversion, the
Company recorded the excess of fair value of $45,455 over the note relieved of
$22,155 as interest expense.





On
February 11, 2009, the Company issued Acacia Investors, LLC 100,000,000 shares
at $0.00005 per share in satisfaction of notes of $5,000 in accordance with the
terms and conditions of the Wrap-Around Agreement between Acacia Investors, LLC
and the Company.  In connection with this conversion, the Company
recorded the excess of fair value of $10,000 over the note relieved of $5,000 as
interest expense.





On
February 23, 2009, the Company issued TJ Management Group, LLC 454,545,454
shares at $0.000055 per share in satisfaction of notes of $23,300 in accordance
with the terms and conditions of the Wrap-Around Agreement between TJ Management
Group, LLC and the Company.  In connection with this conversion, the
Company recorded the excess of fair value of $90,909 over the note relieved of
$67,609 as interest expense.




11
 
 Camelot
Entertainment Group, Inc.
 (A
Development Stage Company)
 Notes
to Financial Statements
 (Unaudited)




6.  STOCKHOLDERS’
DEFICIT-
continued




On
February 23, 2009, the Company issued Hope Capital 255,000,000 shares at
$0.00007 per share in satisfaction of notes of $18,000 in accordance with the
terms and conditions of the Wrap-Around Agreement between Hope and the
Company.  In connection with this conversion, the Company recorded the
excess of fair value of $51,000 over the note relieved of $33,000 as interest
expense.





On
February 24, 2009, the Company issued Primary Finance LLC 100,000,000 shares at
$0.00005 per share in satisfaction of notes of $5,000 in accordance with the
terms and conditions of the Wrap-Around Agreement between Primary and the
Company.   In connection with this conversion, the Company
recorded the excess of fair value of $20,000 over the note relieved of $15,000
as interest expense.





On
February 26, 2009, the Company issued Watson Investment Enterprises 110,000,000
shares at $0.000045 per share in satisfaction of notes of $5,000 in accordance
with the terms and conditions of the Wrap-Around Agreement between Watson
Investment Enterprises and the Company.  In connection with this
conversion, the Company recorded the excess of fair value of $22,000 over the
note relieved of $17,000 as interest expense.




On
February 26, 2009, the Company issued TJ Management Group, LLC 454,545,454
shares at $0.000055 per share in satisfaction of notes of $23,300 in accordance
with the terms and conditions of the Wrap-Around Agreement between TJ Management
Group, LLC and the Company.  In connection with this conversion, the
Company recorded the excess of fair value of $90,909 over the note relieved of
$67,609 as interest expense.





On
February 26, 2009, the Company issued Hope Capital 300,000,000 shares at
$0.00005 per share in satisfaction of notes of $15,000 in accordance with the
terms and conditions of the Wrap-Around Agreement between Hope and the
Company.  In connection with this conversion, the Company recorded the
excess of fair value of $60,000 over the note relieved of $45,000 as interest
expense.





On March
11, 2009, the Company issued Primary Finance LLC 100,000,000 shares at $0.00005
per share in satisfaction of notes of $5,000 in accordance with the terms and
conditions of the Wrap-Around Agreement between Hope and the
Company.   In connection with this conversion, the Company
recorded the excess of fair value of $10,000 over the note relieved of $5,000 as
interest expense.





On March
16, 2009, the Company issued TJ Management Group, LLC 454,545,454 shares at
$0.000055 per share in satisfaction of notes of $23,300 in accordance with the
terms and conditions of the Wrap-Around Agreement between TJ Management Group,
LLC and the Company.  In connection with this conversion, the Company
recorded the excess of fair value of $45,455 over the note relieved of $22,155
as interest expense.





On March
19, 2009, the Company issued Watson Investment Enterprises 200,000,000 shares at
$0.00005 per share in satisfaction of notes of $10,000 in accordance with the
terms and conditions of the Wrap-Around Agreement between Watson Investment
Enterprises and the Company.  In connection with this conversion, the
Company recorded the excess of fair value of $20,000 over the note relieved of
$10,000 as interest expense.





On March
23, 2009, the Company issued Hope Capital 300,000,000 shares at $0.00005 per
share in satisfaction of notes of $15,000 in accordance with the terms and
conditions of the Wrap-Around Agreement between Hope and the
Company.  In connection with this conversion, the Company recorded the
excess of fair value of $60,000 over the note relieved of $45,000 as interest
expense.





On March
24, 2009, the Company issued Watson Investment Enterprises 50,000,000 shares at
$0.00005 per share in satisfaction of notes of $2,500 in accordance with the
terms and conditions of the Wrap-Around Agreement between Watson Investment
Enterprises and the Company.  In connection with this conversion, the
Company recorded the excess of fair value of $5,000 over the note relieved of
$2,500 as interest expense.





On March
24, 2009, the Company issued TJ Management Group, LLC 454,545,454 shares at
$0.000055 per share in satisfaction of notes of $23,300 in accordance with the
terms and conditions of the Wrap-Around Agreement between TJ Management Group,
LLC and the Company.  In connection with this conversion, the Company
recorded the excess of fair value of $45,455 over the note relieved of $22,155
as interest expense.





On March
27, 2009, the Company issued Hope Capital 300,000,000 shares at $0.00005 per
share in satisfaction of notes of $15,000 in accordance with the terms and
conditions of the Wrap-Around Agreement between Hope and the
Company.  In connection with this conversion, the Company recorded the
excess of fair value of $30,000 over the note relieved of $15,000 as interest
expense.




12
 
 Camelot
Entertainment Group, Inc.
 (A
Development Stage Company)
 Notes
to Financial Statements
 (Unaudited)




6.  STOCKHOLDERS’
DEFICIT-
continued




On March
27, 2009, the Company issued Watson Investment Enterprises 200,000,000 shares at
$0.00005 per share in satisfaction of notes of $10,000 in accordance with the
terms and conditions of the Wrap-Around Agreement between Watson Investment
Enterprises and the Company.  In connection with this conversion, the
Company recorded the excess of fair value of $20,000 over the note relieved of
$10,000 as interest expense.





On March
31, 2009, the Company issued Watson Investment Enterprises 150,000,000 shares at
$0.00005 per share in satisfaction of notes of $7,500 in accordance with the
terms and conditions of the Wrap-Around Agreement between Watson Investment
Enterprises and the Company.  In connection with this conversion, the
Company recorded the excess of fair value of $15,000 over the note relieved of
$7,500 as interest expense.





Shares
Issued for Services




On
January 23, 2009, the Company authorized the issuance of 25,000,000 Shares at
$0.0002 per share to Phillip Parsons for craft services, transportation and
security services rendered to the Company for $5,000.





On March
27, 2009, the Company authorized the issuance of 50,000,000 Shares at $0.0001
per share to Phil Scott for accounting services rendered to the Company for
$5,000.





Shares issued
NIR





Between
January 1 and March 31, 2009, the Company authorized the issuance of shares to
various note holders in connection with the NIR agreements entered into between
the Company and NIR from December 2006 to December 2008. As a result of
conversions, the Company
issued the various note holders 398,600,300 in satisfaction of approximately
$23,000 in notes payable at conversion prices ranging from $ 0.0001 to $.00002
per share.





7.
SUBSEQUENT EVENTS





Wrap-Around
Agreements





On April
1, 2009, the Company issued TJ Management Group, LLC 454,545,454 shares at
$0.000055 per share in satisfaction of notes of $25,000 in accordance with the
terms and conditions of the Wrap-Around Agreement between TJ Management Group,
LLC and the Company.





On May 8,
2009, the Company issued TJ Management Group, LLC 454,545,454 shares at
$0.000055 per share in satisfaction of notes of $25,000 in accordance with the
terms and conditions of the Wrap-Around Agreement between TJ Management Group,
LLC and the Company.





On May
12, 2009, the Company issued Primary Finance LLC 100,000,000 shares at $0.00005
per share in satisfaction of notes of $5,000 in accordance with the terms and
conditions of the Wrap-Around Agreement between Primary and the
Company.





NIR
Conversions





On April
1, 2009, the Company issued 3,000,000 shares of its $0.001 par value common
stock to the note holders in connection the callable secured convertible
notes.





On April
6, 2009, the Company issued 381,834,000 shares of its $0.001 par value common
stock to the note holders in connection the callable secured convertible
notes.





Shares Issued for
Services





On April
6, 2009, the Company authorized the issuance of 50,000,000 shares at $0.0001 per
share to Phil Scott for accounting services rendered to the Company for
$5,000.





On May 6,
2009, the Company authorized the issuance of 50,000,000 shares at .0001 per
share to Phil Scott for accounting services related to the valuation of
derivatives to the Company for $5,000.








13







ITEM 2.  MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION





The
matters discussed in this report contain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended, which
are subject to the "safe harbor" created by those sections. These
forward-looking statements include but are not limited to statements concerning
our business outlook or future economic performance; anticipated profitability,
revenues, expenses or other financial items; and statements concerning
assumptions made or exceptions as to any future events, conditions, performance
or other matters which are "forward-looking statements" as that term is defined
under the Federal Securities Laws. All statements, other than historical
financial information, may be deemed to be forward-looking statements. The words
"believes", "plans", "anticipates", "expects", and similar expressions herein
are intended to identify forward-looking statements. Forward-looking statements
are subject to risks, uncertainties, and other factors, which would cause actual
results to differ materially from those stated in such statements.
Forward-looking statements include, but are not limited to, those discussed in
"Factors That May Affect Future Results," and elsewhere in this report, and the
risks discussed in the Company's other SEC filings.





Off-Balance Sheet
Arrangements





We do not
have any off-balance sheet arrangements, financings, or other relationships with
unconsolidated entities or other persons, also known as “special purpose
entities” (SPEs).





Critical
Accounting Estimates





The
preparation of our financial statements in conformity with accounting principles
generally accepted in the United States of America requires our management to
make certain estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. As such, in accordance with the use of
accounting principles generally accepted in the United States of America, our
actual realized results may differ from management’s initial estimates as
reported. A summary of our significant accounting policies is detailed in the
notes to the financial statements, which are an integral component of this
filing.  At March 31, 2009, significant accounting estimates relate to
the fair value of the Company’s derivative liabilities.




Critical
Accounting Policies





The
Company has defined a critical accounting policy as one that is both important
to the portrayal of the Company's financial condition and results of operations;
and requires the management of the Company to make difficult, subjective or
complex judgments. Estimates and assumptions about future events and their
effects cannot be perceived with certainty. The Company bases its estimates on
historical experience and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments. These estimates may change as new events occur, as more
experience is acquired, as additional information is obtained and as the
Company's operating environment changes.





We have
identified certain policies as critical to our business operations and the
understanding of our results of operations; see our annual report on Form 10-K
for these policies. The impact and any associated risks related to these
policies on our business operations is discussed throughout Management's
Discussion and Analysis of Financial Condition and Results of Operations, where
such policies affect our reported and expected financial results. In the
ordinary course of business, we have made a number of estimates and assumptions
relating to the reporting of results of operations and financial condition in
the preparation of our financial statements in conformity with accounting
principles generally accepted in the United States of America. Actual results
could differ significantly from those estimates under different assumptions and
conditions. We believe that the following discussion addresses our most critical
accounting policies, which are those that are most important to the portrayal of
our financial condition and results of operations and require our most
difficult, subjective, and complex judgments, often as a result of the need to
make estimates about the effect of matters that are inherently
uncertain.




Going
Concern Uncertainties





The
accompanying financial statements have been prepared in conformity with
generally accepted accounting principles accepted in the United States, which
contemplate continuation of Camelot as a going concern. However, Camelot has
experienced recurring operating losses and negative cash flows from
operations.  This is due in part to Camelot’s focus on developing
Camelot Studios at ATEP, also referred to herein as “CDT”, which has
necessitated considerable monetary and time commitments from Camelot in lieu of
Camelot pursuing revenue generating opportunities either through its Camelot
Film Group or Camelot Production Services Group divisions. Camelot’s Board of
Directors made the decision to have Camelot focus on the studio project due to
the long term importance of the studio and the impact successful completion of
that project would have on Camelot Studio Group and Camelot overall. As a
result, Camelot has had to delay several revenue generating projects, which it
is now in the process of implementing now that the Camelot Studios at ATEP
project has been tabled. Going forward, Camelot will focus on all three
divisions so as to maximize revenue generating possibilities while continuing to
develop additional studio properties.





14





ITEM 2.  MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION- continued




Going Concern Uncertainties-
continued





Camelot’s
continued existence is dependent upon its ability to increase operating revenues
and/or obtain additional equity financing. As part of our ongoing efforts to
obtain additional financing, in January 2008 Camelot agreed to sell up to 30% of
its interest in Camelot Development Group, LLC (“CDG”) to Camelot Studio
Investors (“CSI”) for up to $3,000,000 on an as needed basis. Proceeds from the
sale were to be used to retire debt, provide operating expenses for Camelot and
establish a reserve for contingency expenditures related to the Camelot Studios
at ATEP project and Camelot Studio Group. To date, Camelot has sold a 2%
interest for proceeds of $200,000 in cash and an additional 3% interest through
debt conversion.  As of March 31, 2009, Camelot has terminated its
involvement in the CDT project following a request by Janez to restructure the
Operating Agreement. This request has resulted in the CDT project being mutually
terminated by Camelot and the SOCCCD.





On
December 27, 2006, we entered into a Securities Purchase Agreement with AJW
Capital Partners, LLC, AJW Offshore, Ltd., AJW Qualified Partners, LLC and New
Millennium Capital Partners II, LLC. Under the terms of the Securities Purchase
Agreement, the Investors purchased an aggregate of (i) $1,000,000 in Callable
Secured Convertible Notes (the “Notes”) and (ii) warrants to purchase 100,000
shares of our common stock (the “Warrants”). This transaction is referred to
also as the “NIR Funding”.





We
entered into an agreement with Eagle Consulting Group, Inc. (“Eagle”) on March
28, 2003, to provide operational funding for the Company, which expired on March
28, 2008. In exchange for twenty percent (20%)of the Company’s outstanding
common stock on a non-dilutive, continuing basis until the Company can secure
additional financing from another source, Eagle provided funding for the
Company’s annual audit, quarterly filings, accounts payable and other ongoing
expenses including office, phones, business development, legal and accounting
fees. On June 5, 2007, the Company completed its funding transaction with NIR
and its note holders, whereby the note holders have invested monies into the
Company, thereby ending the agreement with Eagle.





In
addition, during 2006 and 2007 we also reached agreement with Scorpion Bay,
LLC (“Scorpion”), to provide short-term loans to Camelot on an as needed basis.
To date, all of these loans have been repaid. Further, The Atwell Group has
provided advances for certain Camelot expenses when necessary. It appears likely
that such funding and financial arrangements with our current investors, note
holders and our officers and directors should continue to be enough to meet all
of the Company's cash requirements in 2008. However, the Company must find
additional sources of financing in order to remain a going concern in the
future. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.





Capital
Structure




The
Company has adopted Statement of Financial Accounting Standards No. 129,
"Disclosure of Information about Capital Structure" ("SFAS 129"), which requires
companies to disclose all relevant information regarding their capital
structure.





The
Company issued no shares in 2002 due to conversion, exercises or contingent
issuances. In 2003, the Company issued 20,000,000 shares due to the conversion
of notes payable retiring principal and accrued interest totaling $224,296. We
reached an agreement with Eagle Consulting Group, Inc. on March 28, 2003 to
provide operational funding for Camelot. In exchange for twenty percent (20%)of
the Company’s outstanding common stock on an anti-dilutive, continuing basis
until Camelot could secure additional financing from another source, Eagle
agreed to provide funding for Camelot’s annual audit, quarterly filings,
accounts payable and other ongoing expenses including office, phones, business
development, legal and accounting fees. In 2004, Eagle advanced $127,341 and in
2005 Eagle advanced $125,288. In accordance with the anti-dilutive provision,
the amount of stock due Eagle is calculated on a quarterly basis. This
anti-dilution provision to the agreement could have a material adverse effect on
our shareholders as it might continue for a substantial period of time and as a
result the dilutive effect to the shareholders cannot be fully determined until
the funding from Eagle ceases.





On
January 5, 2005, the Company designated two classes of preferred stock, Class A
Convertible Preferred Stock and Class B Convertible Preferred Stock. Both
classes have a par value of $.001 and 10,000,000 shares authorized. The Series A
is reserved for employees, consultants and other professionals retained by the
Company and the Series B is reserved for the Board of Directors. On June 30,
2005, the Company issued 5,100,000 shares of each Class A Convertible and Class
B Convertible Preferred Stock to Robert Atwell. The Company recorded expense of
$3,366,000 in connection with the Preferred Stock issuances.





15







ITEM 2.  MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION- continued




Capital Structure -
continued




On
October 25, 2007, the Company entered into a Share Issuance Agreement (“SIA”)
with Zuckerman, Kocmur and Scorpion (“JJT”). According to the terms and
conditions of the SIA, as additional consideration for Janez becoming a joint
venture partner with CDG, and in consideration for additional business
development and consulting efforts provided by JJT, JJT received 800,000 shares
of our common stock. 200,000 shares were issued to Zuckerman, 200,000 shares
were issued to Kocmur, these shares were valued at the market price at the date
of issue $0.60 and recorded as professional services in the amount of $240,000.
The 400,000 shares were issued to Scorpion in Preferred Series A and B stock
were recorded at the market price at the date of issue and recorded as
professional services in the amount of $307,276.   In addition,
Zuckerman, Wilson and Joseph Petrucelli were nominated to serve on our Board of
Directors. The parties also agreed on a common stock structure, which provides
JTT and Robert P. Atwell, our Chairman (“Atwell”) with anti-dilution protection.
Further, the SIA directs the Company to seek stockholder approval to increase
the authorized shares of the common stock to 400,000,000 and increase the Board
of Directors from five to seven members.





In
May 2008, Jeff Zuckerman, Joseph Petrucelli and Timothy Wilson resigned from the
Board of Directors.  The company will search for replacements for the
three board of director positions.




On March
31, 2009, there were 9,996,510  shares outstanding of our $0.001 par
value Series B ,Convertible Preferred Stock. The Series B Preferred converts to
10 shares of common stock for every one share of Series B Preferred Stock. Each
share of Series B Preferred Stock is entitled to 1,000 votes. Series B Preferred
ranks superior to all other classes of stock.





On March
31, 2009, there were 10,147,511 shares outstanding of our $0.001 par value
Series A Convertible Preferred Stock. The Series A Preferred converts to four
shares of common stock for every one share of Series A Preferred Stock. Each
share of Series A Preferred Stock is entitled to 50 votes. Series A Preferred
ranks superior to our common stock and ranks junior to our Series B Preferred
Stock.





On March
31, 2009, there were 7,151,500 shares outstanding of our $0.001 par value Series
C Convertible Preferred Stock. The Series C Preferred converts to one shares of
common stock for every one share of Series C Preferred Stock. Each share of
Series C Preferred Stock is entitled to one vote. Series C Preferred ranks
superior to our common stock and ranks junior to our Series B Preferred Stock
and Series C Preferred Stock.







Plan of
Operations





Overview





Camelot
Entertainment Group is working to become a fully integrated, broad based
entertainment company whose planned future global operations expect to encompass
motion picture production and distribution, television programming, production
and syndication, home video acquisition and distribution, digital media
production and distribution, development and operation of studio facilities,
development of new technologies, and distribution of filmed entertainment
worldwide. We are planning to become a global leader in the creation,
production, distribution, licensing and marketing of all form of creative
content and their related businesses across all current and emerging media and
platforms. If we are successful in implementing our business model, we could
lead the industry in every aspect from feature film, television and home
entertainment production and distribution to DVD, digital distribution,
licensing and entertainment related digital media.





Our
Company is divided up into three major divisions, Camelot Film and Media Group,
Camelot Studio Group and Camelot Production Services Group.





During
fiscal year 2009, the Company’s focus will be on the ongoing development of
projects within our Camelot Film and Media Group division, while continuing to
pursue opportunities through our Camelot Studio Group division. The emergence of
Camelot Film and Media Group as it prepares to unveil its Camelot Production
Model (“CPM”) in 2009 points to significant activity for us this year. In order
to implement our plans to become a global media and entertainment company, it is
critical that we build a solid foundation to build upon, and that begins with
making sure that each division is carefully structured and that their respective
business models are implemented in accordance with those designs.





16




ITEM 2.  MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION- continued
  Plan of
Operations - continued








There are
five steps that comprise the backbone of our operating philosophy. Each step,
when implemented, secures the foundation for the next step. These five steps
are:





1.
            Education;
      which leads to





2.
            Infrastructure;
      which leads to





3.
            Utilization;
      which leads to





4.
            Opportunity;
      which leads to





5.
            Success





The
current focus of our operations is our Camelot Film and Media Group division,
where we have acquired several literary properties as we gear up to hopefully
begin physical production this year on several projects in our production
pipeline. Veteran producer H. Kaye Dyal has been brought in to head up
production for us in our Camelot Features division, and he has brought in
several projects that are in various stages of development.





Fiscal
year 2009 should also see the emergence of our production and distribution
division, Camelot Film and Media Group, and the proprietary Camelot Films “CPM”.
Designed to have mainstream appeal and franchise potential, the CPM provides for
the development, production, marketing and distribution of motion pictures by
combining the efficiencies realized by studios of the early 1900’s with the
artistic focus and diversity of today’s independent productions. Using this
approach, we believe the risk-reward relationship facing the typical film
project can be dramatically shifted. For example, whereas a typical film pushes
artists and directors to rush development and production in hopes of conserving
cash, the CPM extends the pre-production cycle substantially to reduce costs
while simultaneously increasing quality. Similarly, whereas many independent
films are limited by the types of post production technology used, due in part
to budget constraints, we intend to invest directly in top of the line
technology, spreading the costs over a targeted minimum number of original
motion pictures each year. One benchmark of the CPM is to develop the ability to
consistently produce films with the look, feel and artistic content of
multi-million dollar pictures, for a fraction of the cost.





Within
our Camelot Film and Media Group division, Camelot Films plans to focus on high
quality, suspense, action, thriller, comedy and dramatic commercial content.
Camelot Features will continue to develop its limited catalogue of literary
properties and preparations to begin pre-production on some of its projects as
packaging is completed. Camelot Television Group plan to continue to explore
potential pilots and television series to produce. Camelot Urban Entertainment
is expected to complete its first feature length documentary during 2009 and
continue the development process on several feature film properties currently
being developed. Camelot Film and Media Group plans to accelerate the activity
in its Latin entertainment division once it completes its search for an
executive to lead that division. We also plan to increase activity in our family
division, Ferris Wheel Films. We hope to renew our consulting agreement with
Capital Arts Entertainment, which is part of a contemplated acquisition plan
that could result in the Capital Arts Management team joining forces with the
Company and heading up Camelot Film and Media Group. Experts in efficient budget
production, the management of Capital Arts has over 250 film credits in
production and distribution, and they have an excellent industry reputation.
More details concerning this potential acquisition are expected to be released
later this fiscal year. Camelot Gaming and our Digital Media division should
begin to see activity in 2009. We continue to develop our distribution division,
with three potential acquisitions being discussed. If completed, these
acquisitions would strengthen our ability to distribute product both
domestically and internationally. Initially delayed by economic uncertainty,
further details on these potential acquisitions should be available during the
2nd quarter of 2009. We continued our consulting relationship with Chris Davis
International in 2009 on international sales and we are currently exploring
expansion of that relationship during 2009.





Due to
our prior focus and the commitment of resources on the Camelot Studios at ATEP
project, we made the decision to slow down the progress of our other divisions
and concentrate on completing the development and entitlement process of the
ATEP project.  When that stopped, we refocused our attention on
Camelot Film and Media Group and will be increasing activity in Camelot
Production Services Group during 2009. Notwithstanding the foregoing, our
priority in 2009 will be as follows: first, Camelot Film and Media Group;
second, Camelot Studio Group; and third, Camelot Production Services
Group.





In
addition, we are in the process of revamping our web site, www.camelotfilms.com.
Our new web site is expected to allow us to provide more detail on our
activities with regular updates. Our site plans to also be fully interactive and
hopefully will provide those accessing our site with the latest technical
innovations and industry wise links. Our site is expected to provide digital
downloading capability, previews, film clips, distance learning, IPTV channels,
blogs, user email, retail outlets, screenplay and film submissions, uploading
capability and consumer interactive sections, including a consumer film review
section where the public can submit their own personalized film, television and
digital media reviews in addition to reviews of the commercial products featured
in the film, television and digital media productions.








17





ITEM 2.  MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION- continued




Plan of Operations-
continued




Our
Financial Statements have been prepared on a going concern basis, which
contemplates the realization of assets and liabilities and commitments in the
normal course of business. In the near term, we expect operating costs to
continue to exceed funds generated from operations. As a result, we expect to
continue to incur operating losses and we may not have sufficient funds to grow
our business in the future. We can give no assurance that we will achieve
profitability or be capable of sustaining profitable operations. As a result,
operations in the near future are expected to continue to use working
capital.




Liquidity
and Capital Resources





We have a
limited history of operations as a film, television and digital media production
and distribution company. We believe that, due to the complex nature of our
business model and the ensuing long-term sales cycles, period-to-period
comparisons of our operating results are not necessarily meaningful and should
not be relied on as an indication of future performance.  Our current
liquidity and capital resources are provided principally through our current
agreements with The Atwell Group, Inc., which are discussed below under Recent
Financing. During the three months ended March 31, 2009, Camelot had no revenue
producing operations, at March 31, 2009 a negative working capital of $1,463,063
and an accumulated deficit from Inception of $17,623,976. These conditions, the
loss of financial support from affiliates, and the failure to secure a
successful source of additional financial resources raise substantial doubt
about Camelot’s ability to continue as a going concern. The financial statements
do not include any adjustments to reflect the possible future effects on the
classification of liabilities that may result from the outcome of this
uncertainty.





Management’s
plans with respect to the current situation consists of restructuring its debt
and seeking additional financial resources from its existing investors, note
holders and CEO Robert Atwell. During the past six months the company was sold
some of the debt of its CEO Robert Atwell to finance current operations of the
company.





Recent
Financing





Camelot
Studio Investors





In
January 2008, we agreed to sell up to 30% of our interest in Camelot Development
Group, LLC (“CDG”) to Camelot Studio Investors LLC (“CSI”) for up to $3,000,000
on an as needed basis. CDG, which is part of our Camelot Studio Group division,
is 50% joint venture partner with Janez Investments Tustin XI (“JIT”) in Camelot
Development Tustin, LLC (“CDT”). CDT was working with the South Orange County
Community College District (“SOCCCD”) to become the master developer for the
Advanced Technology and Education Park (“ATEP”) campus in Tustin,
California, which was to include Camelot Studios at ATEP.




CSI
receives 100,000 shares of our $0.001 par value Series C Convertible Preferred
Stock for each one half of one per cent (.05%) of CDG purchased by CSI. The
managing member of CSI is Scorpion Bay, LLC (“Scorpion”), which is managed
by Timothy Wilson, one of our former at-large directors. The proceeds from the
sale were to be utilized to retire debt, pay operating expenses and provide a
contingency reserve for Camelot Studio Group and the Camelot Studios at ATEP
project.  As of March 31, 2008, the company received $200,000 from CSI
and no shares were issued.  Based on the formula above and company was
to issue 400,000 common shares, which would have resulted in a liability of
$2,200 as of June 30, 2008.  During the second quarter, the company
did not receive any funds from CSI and the joint venture partner Janez has
indicated that no funds will be raised in the future from CSI unless the CDT
Operating Agreement was restructured. As a result, the Tustin project was
eventually terminated under mutual agreement between Camelot and the
SOCCCD.





NIR
Financing





On
December 27, 2006, we entered into a Securities Purchase Agreement with AJW
Capital Partners, LLC, AJW Offshore, Ltd., AJW Qualified Partners, LLC and New
Millennium Capital Partners II, LLC. Under the terms of the Securities Purchase
Agreement, the Investors purchased an aggregate of (i) $1,000,000 in Callable
Secured Convertible Notes (the “Notes”) and (ii) warrants to purchase 100,000
shares of our common stock (the “Warrants”). This transaction is referred to as
the “NIR Financing”.





Pursuant
to the Securities Purchase Agreement, the Investors will purchase the Notes and
Warrants in two tranches as set forth below:





1.
            At
      closing on December 27, 2006 (“Closing”), the Investors purchased Notes
      aggregating $600,000 and Warrants to purchase 100,000 shares of CMEG
      common stock;





2.
            Upon
      effectiveness of the Registration Statement, on June 5, 2007 the Investors
      purchased Notes aggregating
$400,000.








18




ITEM 2. 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION-
continued
  NIR Financing -
continued




The Notes
carry an interest rate of 8% per annum and a maturity date of December 27, 2009.
The notes are convertible into CMEG common shares at the applicable percentage
of the average of the lowest three (3) trading prices for CMEG shares of common
stock during the twenty (20) trading day period prior to conversion. The
“Applicable Percentage” means 50%; provided, however, that the Applicable
Percentage shall be increased to (i) 55% in the event that a Registration
Statement is filed within thirty (30) days of the closing.




At our
option, we may prepay the Notes in the event that no event of default exists,
there are a sufficient number of shares available for conversion of the Notes
and the market price is at or below $25.00 per share. In addition, in the event
that the average daily price of the common stock, as reported by the reporting
service, for each day of the month ending on any determination date is below
$25.00, we may prepay a portion of the outstanding principal amount of the Notes
equal to 101% of the principal amount hereof divided by thirty-six (36) plus one
month's interest. Exercise of this option will stay all conversions for the
following month. The full principal amount of the Notes is due upon default
under the terms of Notes. In addition, we have granted the Investors a security
interest in substantially all of our assets and intellectual property as well as
registration rights.





We
simultaneously issued to the Investors seven year warrants to purchase 100,000
shares of our common stock at an exercise price of $15.00.




In
connection with the recent financing and pursuant to a Structuring Agreement, we
also issued to Lionheart Associates, LLC d/b/a Fairhills Capital (“Lionheart”)
warrants representing the right to purchase up to 5,827 shares of our common
under the same terms as the Warrants issued to the Investors.




The
Investors have contractually agreed to restrict their ability to convert the
Notes and exercise the Warrants and receive shares of our common stock such that
the number of shares of our common stock held by them and their affiliates after
such conversion or exercise does not exceed 4.99% of the then issued and
outstanding shares of CMEG’s common stock.





As a
result of our SB-2 Registration, a total of 132,285 shares of common stock were
registered. They were all converted at various prices during 2007.




The
aggregate principal amount of the Notes is $1,181,803. The estimated conversion
price of the Notes is $0.00006 based on the following: $0.0001 was the average
of the lowest three (3) trading prices for our shares of common stock during the
twenty (20) trading days prior to March 31, 2009, less a 40% discount.
Thus, at a discounted price-per-share of $0.00006, 19,936,483,333 shares of
the Company's common stock would be issuable upon conversion of $1,196,189 into
common shares of the Company ("Conversion Shares"). However, due to contractual
limitations, the most that could be converted in any singular conversion is
approximately 496,505,000 shares, or 4.99% of the outstanding. In addition,
there are contractual limitations that could be imposed by Camelot that would
result in the inability of the note holders to convert during any given 30-day
period.





The
following table shows the effect on the number of shares issuable upon full
conversion, in the event the common stock price declines by 25%, 50% and 75%
from its the most recent trading price.  The company’s shares cannot
be converted below the value of .0001.




Price
      Decreases By3/31/2009
                      
                      
                      
                      25%
                      
                      
                      
                      50%
                      
                      
                      
                      75%Average
      Common Stock Price (as defined above)
                      
                      $
                      0.0001
                      
                      
                      $
                      0.0001
                      
                      
                      $
                      0.0001
                      
                      
                      $
                      0.0001Conversion
      Price (40% Discount)
                      
                      $
                      0.00006
                      
                      
                      $
                      0.00006
                      
                      
                      $
                      0.00006
                      
                      
                      $
                      0.00006100%
      Conversion Shares
                      
                      
                      19,936,483,333





There is
no limit to the number of shares that we may be required to issue upon
conversion of the Notes, as it is dependent upon our share price, which varies
from day to day. This could cause significant downward pressure on the price of
our common stock.





Additional
NIR Financing





On August
28, 2008, we entered into an additional Securities Purchase Agreement with AJW
Capital Partners, LLC, AJW Offshore, Ltd., AJW Qualified Partners, LLC and New
Millennium Capital Partners II, LLC. Under the terms of the Securities Purchase
Agreement, the Investors purchased an aggregate of (i) $160,000 in Callable
Secured Convertible Notes (the “Notes”) and (ii) warrants to purchase 200,000
shares of our common stock (the “Warrants”). This transaction is referred to as
the “Additional NIR Financing”.





19





ITEM 2. 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION-
continued
  Additional NIR
Financing - continued
  On
September 22, 2008, Camelot issued a callable secured convertible note payable
for $15,000 to New Millennium Capital Partners II, LLC. The proceeds were used
to pay for public relations consulting services. The note payable provided for
annual interest at 10%, was secured by the assets of the Company (less
contractual exclusions), and matures on September 21, 2011. The principle and
accrued interest of the note is convertible into Camelot’s common stock at a
variable conversion price which is 50% of the average market price of the common
stock of the lowest three trading days prior to the date of
conversion.





Pursuant
to the additional Securities Purchase Agreement, the Investors will purchase the
Notes and Warrants in three tranches as set forth below:





1.
            At
      closing on December 27, 2006 (“Closing”), the Investors purchased Notes
      aggregating $600,000 and Warrants to purchase 100,000 shares of CMEG
      common stock;





2.
            Upon
      effectiveness of the Registration Statement, on June 5, 2007 the Investors
      purchased Notes aggregating
$400,000.





The Notes
carry an interest rate of 10% per annum and a maturity date of December 27,
2009. The notes are convertible into CMEG common shares at the applicable
percentage of the average of the lowest three (3) trading prices for CMEG shares
of common stock during the twenty (20) trading day period prior to conversion.
The “Applicable Percentage” means 50%; provided, however, that the Applicable
Percentage shall be increased to (i) 55% in the event that a Registration
Statement is filed within thirty (30) days of the closing.




At our
option, we may prepay the Notes in the event that no event of default exists,
there are a sufficient number of shares available for conversion of the Notes
and the market price is at or below $.001 per share. In addition, in the event
that the average daily price of the common stock, as reported by the reporting
service, for each day of the month ending on any determination date is below
$.001, we may prepay a portion of the outstanding principal amount of the Notes
equal to 101% of the principal amount hereof divided by thirty-six (36) plus one
month's interest. Exercise of this option will stay all conversions for the
following month. The full principal amount of the Notes is due upon default
under the terms of Notes. In addition, we have granted the Investors a security
interest in substantially all of our assets and intellectual property as well as
registration rights.





We
simultaneously issued to the Investors seven year warrants to purchase
20,000,000 shares of our common stock at an exercise price of
$0.001.




Scorpion Bay
Loans





On June
15, 2007, we entered into a loan agreement with Scorpion Bay, LLC
(“Scorpion”), whereby Scorpion loaned Camelot $300,000 in three tranches of
$100,000 each on June 15, July 15 and August 15 2007. Interest on the loan was
in the form of 30,000 shares of our $0.001 par value common stock (“Shares”).
The loan was due and payable on November 15, 2007. The loan was secured with a
blanket note and second deed of trust on real property owned by Robert and
Tamara Atwell. Robert Atwell is the Chairman, President and CEO of Camelot
(“Atwell”). In the event the loan was not paid by the due date, the note could
be extended by Scorpion at a cost of 7,500 Shares for each 30-day extension. On
or about October 25, 2007, Scorpion agreed to release and/or transfer the
security interest provided by Atwell in reference to the $300,000 loan to the
Company by Scorpion on June 15, 2007 and the amount due to Scorpion was
transferred to real property owned by Atwell. As a result, Camelot will not
incur any additional interest charges and/or fees connected with the loan.
Scorpion received a total of 130,000 Shares (including 50,000 shares issued to
Dolphin Communities) in connection with the loan and events related
thereto.





On
November 21, 2006, we entered into a loan agreement with Scorpion, whereby
Scorpion loaned Camelot $250,000. Interest was paid in the form of 500,000
Shares. As additional consideration, Scorpion received a total of 15,000 Shares.
The loan was due and payable on March 22, 2007. The loan was secured with a
blanket note and second deed of trust on real property owned by Robert and
Tamara Atwell. In the event the loan was not paid by the due date, the note
could be extended by Scorpion at a cost of 15,000 Shares for the first 30-day
extension, 20,000 Shares for the second 30-day extension, 25,000 Shares for the
third 30-day extension and so forth. The note was paid in full on June 5, 2007.
As a result, Scorpion received a total of 80,000 Shares in connection with the
loan and events related thereto.





Additional
Scorpion Bay Loan





On
November 23, 2007, Scorpion entered into a loan agreement with Love Bug
Management Corp. (“Love Bug”), an entity owned by Atwell, whereby Scorpion
loaned Love Bug $100,000. The proceeds were used for Atwell and Camelot
expenses. As a result of this loan, Atwell paid approximately $36,000 in direct
Camelot expenses. The loan was secured with a blanket note and second deed of
trust on real property owned by Robert and Tamara Atwell. Scorpion received
47,000 Shares in connection with the loan and events related
thereto.







20





ITEM 2. 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION-
continued
  The Atwell
Group




During
the three months ended, March 31, 2009, The Atwell Group, Inc. has paid for
expenses on behalf of Camelot as needed. With the occurrence of other financial
resources becoming available, the amount of resources committed by The Atwell
Group has diminished when compared to prior years. Our Chairman, Robert Atwell,
owns the Atwell Group, Inc.





The
Atwell Group, Inc. has paid for expenses on behalf of Camelot as needed. With
the occurrence of other financial resources becoming available, the amount of
resources committed by The Atwell Group had diminished when compared to prior
years. Due to the lack of funding being realized by the CSI investment agreement
and other transactions, we have renewed our agreement with The Atwell Group to
provide funding as needed during 2009. The Atwell Group, Inc. is owned by our
Chairman, Robert Atwell.





RESULTS
OF OPERATIONS





General





Available
Information and Website





The
Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K and any amendments to such reports filed with
or furnished to the Securities and Exchange Commission (“SEC”) pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), are available free of charge on the Company’s website at
www.camelotfilms.comas
soon as reasonably practicable after such reports are electronically filed with
the SEC.





Business
Development





Camelot
Films®, Inc., now a subsidiary of the Company, was originally founded in 1978 by
our current Chairman, Robert P. Atwell, as a feature film production and film
finance management company. Camelot Films was originally incorporated in
Delaware and had offices in London, England, Los Angeles, California and New
York, New York. Between 1978 and 1988, Camelot Films was actively involved in
the development, finance and production of independent feature films. Between
1988 and 2003, Camelot Films was primarily active in the development and
financial structuring of independent feature films and the ongoing development
of its Camelot Production Model (“CPM”). Beginning in 2003, Camelot became
active once again in the production and distribution of independent feature
films, along with its development and finance activities.





On
October 1, 1999, the Company’s predecessor corporate entity was incorporated in
Delaware as Dstage.com, Inc.





On March
31, 2003, the operations of Camelot Films were absorbed into the Company as part
of a corporate restructuring. As a result of this restructuring, the Company’s
new management team, headed by Mr. Atwell, adopted a new business model to
pursue the development, production, marketing and distribution of motion
pictures.






On April
16th, 2004, the Company officially changed its name to Camelot Entertainment
Group, Inc.





Our
initial business development plan was to become a vertically integrated media
enterprise that creatively conceptualizes, finances, produces, and distributes
original entertainment content across various media, including motion pictures,
television, interactive gaming, radio and a multitude of digital media
channels.  Through the absorption of Camelot Films and the
establishment of key operating divisions, including Camelot Distribution Group
Inc., a Nevada corporation, we began to implement our new business model of
acquiring, developing, producing, marketing and distributing motion pictures,
television and digital media on a limited basis.





During
2004 and 2005, we formally acquired our three Camelot Films subsidiaries,
Camelot Films, Inc., a Nevada corporation, Camelot Films, Inc., a California
corporation, and Camelot Films, Inc., a Delaware corporation. We established a
family film subsidiary, Ferris Wheel Films, Inc., a Nevada corporation. In
September 2005, we established Camelot Studio Group with the responsibility of
acquiring, designing, developing and operating our planned major studio
complexes. Also in September 2005, we began the process of assessing the
feasibility of an educational studio complex in Tustin, California. Designed to
be a state-of-the-art education and technology campus with an emphasis on film,
television and digital media, the project known as the “Advanced Technology and
Education Park”, which was planned to be the home base for Camelot Studio
Group operations, has been tabled. Camelot Studio Group is currently assessing
the feasibility of additional complexes in Anaheim, San Diego and New
Orleans.




During
fiscal year 2006, with the emergence of our studio group operations, we decided
to implement a corporate structure that would feature the parent company,
Camelot Entertainment Group, Inc., and three subsidiaries, Camelot Film Group,
Camelot Studio Group and Camelot Production Services Group. By establishing
three top-level divisions, we expect to be able to streamline our management
efforts in the future, concentrate cost centers and expand revenue
potential.





21




ITEM
2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION-
continued




Business Development -
continued




During
fiscal year 2008, our efforts are focused on our first major studio complex
through our Camelot Studio Group division and on the continuing development of
projects through our Camelot Film Group division. We also continued to make
progress toward the planned launch of our various divisions described
herein.




THREE
MONTH PERIOD MARCH 31, 2009, COMPARED TO THE THREE MONTH PERIOD ENDED MARCH 31,
2008:




The
Company did not generate any revenue during the three months ended, March
31, 2009 or March 31, 2008.





All
expenses incurred during the comparative periods were general and administrative
in nature.





The
Company has incurred $13,624,700 of general and administrative expenses since
its inception. General and administrative expenses were $206,132 for
the three months ended March 31, 2009, respectively, compared to $263,220
for the three months ended March 31, 2008. Decrease in expenses primarily
due to a reduction in professional fees for the quarter.





The
general and administrative expenses for the three month period were comprised of
$142,500 of officers salaries and $3,629 of professional services, rent $6,853,
administrative costs and other fees $27,001, audit costs $12,000, legal fees
$6,896 and $7,253 in valuation costs.





Other
income (expense) for the three months ended March 31, 2009, was $712,823, which
consisted of a loss of $73,793 from the change in the fair value of the
Company’s derivative liabilities on its convertible note and preferred stock.
Interest expense during the three months ended, March 31, 2009 was $639,030
which consisted mostly of expense related to the excess of fair value of the
Company’s common stock of debt satisfied..  During the three months
ended March 31, 2008, other income (expense) of $539,768 consisted of a gain on
derivative liabilities of $420,998, other income $200,000 and interest expense
of $81,230.







ITEM
3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





FACTORS THAT MAY AFFECT FUTURE
RESULTS





We
have an Accumulated Deficit and we have no History of Operations as a Motion
Picture Company





We
have incurred losses in each operating period since our inception on October 12,
1999. Operating losses may continue, which could adversely affect financial
results from operations and stockholder value, and there is a risk that we may
never become profitable.





Risk
Factors





Ability
to Achieve Profitable Operations





Our
operations to date have been limited. Our focus has been on our Camelot Studio
Group division, which has limited our ability to fully implement our other major
divisions. The development and implementation of our business model is a
long-term process. The normal fiscal cycle of a feature film does not typically
generate revenues for 18 to 24 months. Subsequent to that, the fiscal life cycle
of a feature film is close to 7 years initially, with affiliate, residual and
syndication revenues continuing for years. As of March 31, 2009, we have did not
have a project in production. As a result of our long sales cycles, it is
difficult to determine with any certainty how our short-term financial picture
will evolve. In the near term, we expect operating costs to continue to exceed
funds generated from operations. As a result, we expect to continue to incur
operating losses and while we have resources available to grow our business in
2009, we may not have sufficient funds to grow our business in the future. We
can give no assurance that we will achieve profitability or be capable of
sustaining profitable operations. As a result, operations in the future could
require a significant increase in the use of working capital.





To
successfully grow the individual divisions of the business, we must begin to
devote the time necessary to fully implement their respective business models,
decrease our cash burn rate over time, begin to generate revenues in order to
improve our cash position and establish ongoing revenues in each division, and
succeed in our ability to raise additional capital through a combination of
primarily public or private equity offering or strategic alliances. We also
depend on certain consultants and our executives, and the loss of any of those
consultants or executives, may harm our business.




We
have a limited operating history as a motion picture, television and digital
media company in which to evaluate our business





As
Camelot Entertainment Group, we have a limited operating history as a motion
picture, television and digital media company. To date, we have generated no
revenues and a limited operating history as a motion picture company upon which
an evaluation of our future success or failure can be made. Our primary focus
has been the development of Camelot Studios at ATEP and to a lesser scale
project development within Camelot Film Group. As a result, many of our planned
divisions are not operational or have very limited operations as of March 31,
2009. While current company assets and financial commitments are suitable for
the projected financial needs forecast during 2009, we do not know at this time
the outlook for 2010 and beyond. No assurances of any nature can be made to
investors that the company will be profitable. There can be no assurances that
our management will be successful in managing the Company as a motion picture,
television and digital media company.





22




ITEM 3.  QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - continued




Risk
Factors - continued




We
will require additional funds to achieve our current business strategy and our
inability to obtain additional financing could cause us to cease our business
operations in the future if suitable funding is not secured





Even with
the proceeds from offerings and other resources in 2008, we will need to raise
additional funds through public or private debt or sale of equity to fully
achieve our business strategy. Such financing may not be available when needed.
Even if such financing is available, it may be on terms that are materially
adverse to your interests with respect to dilution of book value, dividend
preferences, liquidation preferences, or other terms.





Our
ability to grow our company through acquisitions, business combinations and
joint ventures, to maintain and expand our development, production and
distribution of motion pictures, television programming and digital media and to
fund our operating expenses will depend upon our ability to obtain funds through
equity financing, debt financing (including credit facilities) or the sale or
syndication of some or all of our interests in certain projects or other assets.
Our business plan requires a substantial investment of capital. The production,
acquisition and distribution of motion pictures require a significant amount of
capital. A significant amount of time may elapse between our expenditure of
funds and the receipt of commercial revenues from our motion pictures, if any.
This time lapse requires us to fund a significant portion of our capital
requirements from private parties, institutions, and other sources. Although we
intend to reduce the risks of our production exposure through strict financial
guidelines and financial contributions from broadcasters, sub-distributors, tax
shelters, government and industry programs and studios, we cannot assure you
that we will be able to implement successfully these arrangements or that we
will not be subject to substantial financial risks relating to the production,
acquisition, completion and release of future motion pictures. If we increase
our production slate or our production budgets, we may be required to increase
overhead, make larger up-front payments to talent and consequently bear greater
financial risks. Any of the foregoing could have a material adverse effect on
our business, results of operations or financial condition.





If we are
unable to obtain financing in the future on reasonable terms, we could be forced
to delay, scale back or eliminate certain elements of our business model. In
addition, such inability to obtain financing in the future on reasonable terms
could have a material negative effect on our business, operating results, or
financial condition to such extent that could be forced to restructure, file for
bankruptcy, sell assets or cease operations, any of which could put our Company
and any investments into our Company at significant risk.




We
are subject to a working capital deficit, which means that our current assets at
March 31, 2009, were not sufficient to satisfy our current
liabilities





As of
March 31, 2009, we had a working capital deficit of $1,463,063 which means that
our current liabilities of $1,503,219 exceeded our current assets of $40,156 by
that amount on March 31, 2009. Current assets are assets that are expected to be
converted to cash within one year and, therefore, may be used to pay current
liabilities as they become due. Our working capital deficit means that our
current assets on March 31, 2009, were not sufficient to satisfy all of our
current liabilities on that date. We will have to raise additional capital or
debt to fund the deficit.




Our Contemplated
Acquisitions and Related Letters of Intent May Be Delayed Due to Current
Worldwide Economic Conditions





With the
financial uncertainty in the worldwide markets, our ability to successfully
complete our planned acquisitions during the first quarter of 2009 this may be
adversely affected, resulting in delays which could push completion into 2010.
As a result, the related letters of intent and other transactional documents
could be adversely affected with changes in terms and conditions, pricing and
other factors which eventually could cause us or the companies being acquired to
reconsider the acquisition transactions.




ITEM
4.  CONTROLS AND PROCEDURES




We
maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our Exchange Act reports is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission’s rules and forms, and that such information
is accumulated and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow for timely
decisions regarding required disclosure. In designing and evaluating the
disclosure controls and procedures, management recognizes that any controls and
procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives, and management
is required to apply its judgment in evaluating the cost-benefit relationship of
possible controls and procedures.










23




ITEM 4.  CONTROLS AND
PROCEDURES- continued




Evaluation of Disclosure
Controls and Procedures -
continued




The
Company, under the supervision and with the participation of its management,
including the Chief Executive Officer and Chief Financial Officer, evaluated the
effectiveness of the design and operation of the Company’s “disclosure controls
and procedures” (as such term is defined in Rule 13a-15(e) under the
Exchange Act) as of the end of the period covered by this report. Based on that
evaluation, the Chief Executive Officer and the Chief Financial Officer
concluded that the Company’s disclosure controls and procedures are effective to
ensure that information required to be disclosed in reports filed or submitted
by the Company under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the SEC’s rules and forms and that
information required to be disclosed by the Company is accumulated and
communicated to the Company’s management to allow timely decisions regarding the
required disclosure.




Changes
in Internal Control Over Financial Reporting




To the
best of our knowledge and belief, there has been no change in our internal
controls over financial reporting during the three months ended, March 31, 2009
that has materially affected, or is reasonably likely to materially affect, our
internal control over financial reports.





Management’s Report on Internal Control Over
Financial Reporting





Our
management, including the Certifying Officer, is responsible for establishing
and maintaining adequate internal control over financial reporting, as defined
in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Our
internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of our financial reporting and
the preparation of our financial statements for external purposes in accordance
with generally accepted accounting principles. Our internal control over
financial reporting includes those policies and procedures that: (i) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of our assets, (ii) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with accounting principles generally accepted
in the United States of America, and that our receipt and expenditures are being
made only in accordance with authorizations of management and our Board of
Directors; and (iii) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of our assets that
could have a material effect on the financial statements.





All
internal control systems, no matter how well designed, have inherent
limitations. A system of internal control may become inadequate over time
because of changes in conditions or deterioration in the degree of compliance
with the policies or procedures. Therefore, even those systems determined to be
effective can provide only reasonable assurance with respect to financial
statement preparation and presentation.





Our
management assessed the effectiveness of our internal control over financial
reporting as of March 31, 2009 using the criteria set forth by the Commission of
Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated
Framework. Based on this assessment, our management concluded that, as of
December 31, 2008, our internal control over financial reporting disclosure
controls and procedures were not effective to ensure that the information
required to be disclosed by us in the reports that we file or submit under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commission’s
rules and forms, and is accumulated and communicated to our management,
including the Certifying Officer, as appropriate to allow timely decisions
regarding required disclosure, due to the material weaknesses described
below.





In light
of the material weaknesses described below, our management, including the
Certifying Officer, performed additional analysis and other post-closing
procedures to ensure our financial statements were prepared in accordance with
generally accepted accounting principles. Accordingly, we believe that the
financial statements included in this report fairly present, in all material
respects, our financial condition, results of operations and cash flows for the
periods presented.





A
material weakness is a control deficiency (within the meaning of the Public
Company Accounting Oversight Board (“PCAOB”) Auditing Standard No. 2) or
combination of control deficiencies, which result in more than a remote
likelihood that a material misstatement of the annual or interim financial
statements will not be prevented or detected. The management has identified the
following four material weaknesses which have caused the management to conclude
that our disclosure controls and procedures were not effective at the reasonable
assurance level:





1.
            We
      do not have sufficient segregation of duties within accounting functions
      due to the limited personnel, which is a basic internal control. This will
      change with the addition of more staff
members.





2.
            Procedures
      are not in place to properly cut-off accounts payable and accrue
      un-invoiced liabilities.





3.
            The
      accounting department lacks adequate skills to account for stock based
      compensation for employees and non-employees related to stock issued for
      liabilities or services, and derivative accounting for convertible debt
      with a conversion rate with no floor (causing derivative
      accounting).





24





ITEM 4.  CONTROLS AND
PROCEDURES- continued
  Management’s Report on Internal Control Over
Financial Reporting -
continued




Our
management, including the Certifying Officer, has discussed this matter with our
current independent registered public accounting firm. To remediate the material
weaknesses in our disclosure controls and procedures identified above, in
addition to working with our independent auditors, we have continued to refine
our internal procedures to address these weaknesses. These procedures include
using an external consultant to assist in the identification and calculation of
difficult accounting transactions which generally are associated with debt and
equity.







Code of
Ethics





We have
adopted a Code of Business Conduct that applies to all our directors, officers
(including our principal executive officer and principal financial officer) and
employees. The Code of Business Conduct can be found on our website at www.camelotfilms.com.
We plan to also post on this section of our website any amendment to the Code of
Business Conduct, as well as any waivers that are required to be disclosed in
accordance with Securities and Exchange Commission or market
regulations.







PART II. OTHER
INFORMATION





ITEM 1.  LEGAL
PROCEEDINGS





None.







ITEM 2.  CHANGE IN
SECURITIES





None







ITEM 3.  DEFAULTS UPON SENIOR
SECURITIES





None







ITEM 4.  SUBMISSION OF MATTERS
TO VOTE OF SECURITIES HOLDERS





None






ITEM
5.  OTHER INFORMATION





On March
23, 2009





Authorized
common shares were increased from 3,000,000,000 to 6,000,000,000
shares.





On March
29, 2009





Authorized
common shares were increased from 6,000,000,000 to 10,000,000,000
shares.











25




ITEM
6.  EXHIBITS AND REPORTS ON FORM 8-K
 
 a.
Exhibits
 
 31.1
              Certificate of the Chief
      Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act of 1934
      as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
  2002
 
 31.2
              Certificate of the Chief
      Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act of 1934
      as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002
  32.1
              Certification of Chief Executive
      Officer pursuant to 18 U.S.C. Section 1350,as adopted pursuant to Section
      906 of the Sarbanes-Oxley Act of
2002.
  32.2
              Certification of Chief Financial
      Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
      906 of the Sarbanes-Oxley Act of
2002.
 
  b.
Reports on Form 8-K
 
 None




SIGNATURES





In
accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report on Form 10-Q to be signed on its behalf by the
undersigned, thereunto duly authorized.






CAMELOT
      ENTERTAINMENT GROUP, INC.(Registrant)Date:
      May 20, 2009
              By:
              /s/ ROBERT
      P. ATWELLTitle:
      Chief Executive Officer




Date: May
      20, 2009
              By:
              /s/ GEORGE
      JACKSONTitle:
      Chief Financial Officer




































































26